Holiday Inn 2005 Annual Report Download - page 26

The Audit Committee assists the Board in observing its
responsibilities in relation to the integrity of the Group’s financial
statements and associated announcements, the adequacy of internal
control and risk management systems and the appointment and work
of the internal and external auditors. The role of the Audit Committee
is summarised below and in full in its terms of reference, a copy of
which is available on the Company’s website or in writing on request.
The Committee’s composition, the dates of appointment and the
attendance of its members throughout 2005 are set out on page 22.
The Committee’s Chairman and financial expert, David Kappler,
is a chartered management accountant and until April 2004 was
Chief Financial Officer of Cadbury Schweppes plc. He also chairs
the Audit Committee of another UK public limited company.
The Committee’s principal responsibilities are to:
• review the Group’s public statements on internal control and
corporate governance compliance prior to their consideration
by the Board;
• review the Group’s processes for detecting and addressing
fraud, misconduct and control weaknesses and to consider the
response to any such occurrence, including overseeing the
process enabling the anonymous submission of concerns;
• review reports from management, internal audit and external
audit concerning the effectiveness of internal control, financial
reporting and risk management processes;
• review with management and the external auditor any financial
statements required under UK or US legislation before
submission to the Board;
• establish, review and maintain the role and effectiveness
of the Internal Audit function, including overseeing the
appointment of the Head of Internal Audit;
• assume responsibility for the appointment, compensation,
resignation, dismissal and the overseeing of the external auditor,
including review of the external audit, its cost and effectiveness;
• pre-approve non-audit work to be carried out by the external
auditor and the fees to be paid for that work along with the
monitoring of the external auditor’s independence; and
• adopt and oversee a specific Code of Ethics for the senior
financial officers, which is consistent with the Group’s overall
Guidelines for Proper Business Conduct.
The Committee discharges its responsibilities through a series of
Audit Committee meetings throughout the year at which detailed
reports are presented for review. The Committee commissions
reports, either from external advisers, the Head of Internal Audit,
or Group management, after consideration of the major risks to
the Group or in response to developing issues. The external
auditor attends its meetings as does the Head of Internal Audit,
both of whom have the opportunity to meet privately with the
Committee, in the absence of Group management, at the
conclusion of each meeting.
All proposals for the provision of non-audit services by the external
auditor are pre-approved by the Audit Committee or its delegated
member, the overriding consideration being to ensure that the
provision of non-audit services does not impact the external
auditor’s independence and objectivity.
During the year, the Committee’s deliberations included the
following matters:
• quarterly, interim and full year financial results. These public
financial statements are reviewed by the Committee in advance
of their consideration by the Board. Adequate time is allowed
between the Committee’s review and the Board’s approval for
any actions or further work requested by the Committee to be
completed;
• the scope and cost of the external audit;
• any non-audit work carried out by the Group’s external auditor
and trends in the non-audit fees in accordance with the
Committee’s policy to ensure the safeguarding of audit
independence and objectivity;
• the external auditor’s quarterly, interim and full year reports;
• the effectiveness of the external auditor and consideration of
their objectivity, independence and reappointment;
• the scope of the annual internal audit plan, the Internal Audit
department’s approach to delivering assurance, its resourcing
and the results of its reviews;
• the effectiveness of the Internal Audit function and its
compliance with professional standards;
• any major changes in the Group’s internal controls;
• the co-ordination of the internal and external audit functions;
• the Group’s framework for the identification and control of
major risks, and the results of the Group risk review process;
• corporate governance developments in the UK and the US;
• reports from the Head of Group Risk Management on the
activities of that function;
• monitoring of the Group’s International Financial Reporting
Standard conversion exercise;
• overseeing the Group’s Sarbanes-Oxley Act compliance work;
• the disclosure controls and procedures operated by the Group,
with reference to periodic reports from the Chairman of the
Disclosure Committee;
• periodic reports on any allegations made via the Group’s
whistleblowing procedures and the effectiveness of these
procedures;
• any material litigation involving the Group;
• any relevant correspondence with regulatory bodies on the
subject of financial reporting or internal financial control; and
• consideration of the effectiveness of the Audit Committee.
David Kappler
Chairman of the Audit Committee
1 March 2006
audit committee report
24 InterContinental Hotels Group 2005